SOVIET EXCAVATATORS SET TO DIG INTO US MARKET

SOVIET EXCAVATATORS SET TO DIG INTO US MARKET

Soviet-made wheeled excavators powered by General Motors Corp. engines will roll into the United States in 30 to 45 days, says Eilat Lev, the feisty president and chief operating officer of Earthworm Inc.

Ardsley, N.Y.-based Earthworm has been an international distributor of construction and energy equipment for 25 years."This is the first time a Russian product was actually changed to fit

physically the American market, " said Mr. Lev in a private interview just before he left for the Soviet Union Saturday.

In Moscow, he will finalize shipping arrangements, and inspect and test the prototype models built at factories in the cities of Kiev, Kalinin and Kovrov.

For the 38-year-old Israeli immigrant, negotiations with Machinoexport, the trading arm of Moscow's Ministry of Construction and Road Building Machines, is bearing fruit after two years.

The ministry has allowed changes in Soviet assembly lines to make the excavators suitable for the U.S. construction industry. "The American-made engines are fitted into the excavators in the various factories for export to the United States," said Mr. Lev.

The Soviets also modified other parts used in building the excavators, and

put in more comfortable operator seats, Mr. Lev said. He noted that such flexibility signals the start of a Soviet move toward some sort of liaison with the U.S. automotive industry.

"They might decide later on to sell (the excavators) in the Soviet Union, but our venture is to produce them specially for the U.S. market," he said.

The initial shipment of 12 excavators, worth $500,000, will be test

marketed in the spring by construction contractors in the United States. Mr. Lev said his company has already received many inquiries from end-users. ''Various American contractors have expressed interest in buying the excavators," he said.

If the U.S. reception for the excavators is warm, said Earthworm Chairman Michael Zinman, some 1,300 more will be imported.

These mechanical mutants, the offspring of outdated Soviet machines and U.S. entrepreneurship, are scheduled to leave the Soviet Union sometime this month on Soviet ships. In Western Europe, they will be transferred to a U.S. vessel that will dock in Newark, N.J.

Earthworm expected the machines to arrive in the summer, but changes in the barter agreement delayed the shipment.

These delays, however, were not enough to quell Mr. Zinman's appetite for doing business with the Soviets. Trading with the Soviet Union, he said, is an evolutionary process.

"It's been an evolution of cooperation (between) the Soviets and us," he said thoughtfully. "We are very positive about the results and of the acceptance of this product in the United States."

The excavator deal with the Soviet Union has perked up Earthworm's earnings. The company's third-quarter earnings were $1.553 million or 15 cents a share, compared with a loss of $59,327 during the same period in 1986.

Ibrat Yakoubov, trade officer at Amtorg Trading Corp., the New York trading arm of the Soviet government, said more negotiations with Earthworm are under way in Moscow for imports of "different types of excavators" in the future.

Industry observers doubt that the U.S. reception to Earthworm's new import would be very enthusiastic.

A spokesman at Caterpillar Inc., a major heavy equipment manufacturer who has seen the Japanese nibble into its U.S. market share in the last decade, said his company does not see Earthworm's new product as a substantial competitor yet.

Imports from Japan, mainly Tokyo-based Komatsu Ltd., is the current thorn in Caterpillar's side, said the spokesman.

Zbigniew Brzezinski, professor of government at Columbia University and former National Security Adviser in the Carter administration, is ambivalent about the reception for the Soviet-made machines.

"I really don't know how the Americans will feel about this kind of product," he said. But, "in my view, trade between the United States and the Soviet Union will increase marginally in the next five years," said Mr.

Brzezinski, who is also counselor at the Washington-based Center for Strategic Studies.

According to the Commerce Department, U.S. imports of Soviet machinery and transport equipment are minuscule.

Between January and October 1987, such imports totaled only $6.3 million, up 57.5 percent from the same period in 1986.

But even such a small amount provides the Soviet Union with much-needed hard currency to finance its own imports and modernization programs.

QUICK THINKING WAS KEY TO CLINCHING IMPORT DEAL Journal of Commerce Staff

Michael Zinman, chairman of Earthworm Inc., said nimbleness in dealing with Soviet authorities was the key to working out a contract for the export of Soviet excavators to the United States.

"Originally, we went to the Soviet Union and offered to purchase Soviet excavators. In turn, the Soviets would purchase from Earthworm gas turbines, with each turbine costing $4 million to $5 million. That was the original proposal from the Soviets," Mr. Zinman said.

A memorandum of understanding signed last summer called on Earthworm to buy $40 million worth of excavators and the Soviet authorities to purchase some $20 million worth of gas turbines and the same amount of other capital goods.

"In other words, the protocol was, for every dollar of Soviet machinery we buy, we will have the opportunity to sell to them a dollar of American manufactured goods," said Mr. Zinman.

Finally, the 50-year-old chairman added, "we decided that it would be beneficial to install American engines in the excavators. This eases (the machines') introduction and acceptance in the (U.S.) market."